The all-in cost of raising debt.
The headline margin is the number every lender leads with, and it is rarely the number that decides which offer is cheapest. A raise carries a stack of separate costs — the interest itself, the lender’s fees, the lawyers on both sides, diligence, and the adviser who runs the process — and they do not move together. This guide takes each one apart, totals a £5m and a £10m raise honestly, and marks the places a borrower overpays without noticing. It deepens the shorter answer in the guides; the figures here are as at July 2026.
The cost of debt is a stack of charges, well beyond the rate.
Split the cost of a raise into two kinds. There is the ongoing cost of carrying the debt, which runs for the life of the facility, and the one-off cost of putting it in place, which you pay once at close. Confusing the two is how borrowers pick the wrong deal: a keen margin with heavy upfront fees can cost more over a three-year hold than a higher margin with none.
The ongoing cost has two parts. The base rate is the reference rate the margin sits on top of, now SONIA, which tracks the Bank of England’s Bank Rate — held at 3.75% by the Bank in June 2026. You do not negotiate it; it is the price of money. The margin is the annual rate the lender charges over that base, and it is where the lender’s view of your credit shows up. On a clean, secured, lowly-geared deal a clearing bank might charge a point or two over base; a private-credit fund underwriting cashflow and stretching leverage charges materially more — broadly SONIA plus 550 to 800 basis points at the institutional end. That spread is the price of capital that lends where a bank’s credit policy will not, and for a borrower who fits the bank’s box it is money wasted.
On top of the interest sit the fees, and there are more of them than most borrowers expect: the arrangement fee, sometimes an original issue discount, a commitment fee on anything undrawn, prepayment or exit fees if you leave early, occasionally a monitoring fee, then the legal and diligence costs and the adviser’s fee. The next sections take them in turn, then total two real raises.
The fees the term sheet buries in the schedule.
The arrangement fee — also called an upfront, structuring or completion fee — is paid on day one and scales with the lender type. On a bank deal it sits nearer 1% of the facility; on a private-credit or fund deal it is typically 2 to 3%. Arranger and structuring fees of 50 to 150 basis points are common even on larger club deals, so the fund end of the range reflects the harder underwriting rather than an overcharge. It is charged on the committed amount, not just what you draw, so an oversized facility you never use still carries its fee.
On fund deals you also meet the original issue discount, or OID. Instead of charging a fee, the lender funds you less than par: you draw 98 or 99 and repay 100. A 1 to 2% OID is common on senior and unitranche private-credit loans, running to 2 to 3% on some deals. It is economically the same as an extra upfront fee — the lender keeps the difference — but it hides from the margin, so a borrower comparing headline rates misses it entirely. Count it as another upfront fee, which is all it is.
The commitment fee — or non-utilisation fee — is charged on the portion of a facility you have available but have not drawn, most often on a revolving credit facility. UK market convention, following the Loan Market Association standard, is a fee of around 35% of the applicable margin, so on a facility priced at SONIA plus 4% the undrawn line costs roughly 1.4% a year. It is the price of keeping committed money on the shelf, and it is why sizing a revolver to what you actually need, rather than to a comfortable round number, saves real cash over the term.
Last come the exit costs. On most bank term loans you can prepay at par with no penalty, and a revolver you draw and repay freely. Fund debt is different: a unitranche typically carries call protection in the early years — often a non-call period, then a prepayment premium that steps down, say 3% in year one, 2% in year two, 1% in year three, then par, occasionally a make-whole that can be expensive. The fund priced its return over an expected hold and will not give it up cheaply. Some facilities also carry a flat exit or non-utilisation fee on repayment. A keen margin with heavy call protection is frequently the dearer deal if you expect to refinance or sell before the protection falls away. This deepens the guides answer on early repayment.
A monitoring or agency fee — a modest annual sum, typically a few thousand pounds, sometimes more on a fund facility — covers the lender’s ongoing administration of the loan. It rarely moves the decision, but it belongs on the schedule you total, because it recurs.
You pay for your own advisers and, usually, the lender’s too.
Legal costs land on both sides. You pay your own solicitor to negotiate the facility agreement, the security and the conditions precedent, and — this surprises first-time borrowers — you almost always pay the lender’s legal costs as well, because the facility agreement makes the borrower bear them. On a straightforward £3–15m bilateral deal, budget a combined legal bill in the low tens of thousands; a leveraged deal with an acquisition, multiple security packages or an intercreditor agreement runs higher, into the mid tens of thousands or beyond. The variable is complexity, not facility size: a simple £10m refinancing can cost less in legals than a fiddly £4m buyout.
Diligence is often the largest single line after the arrangement fee, and you pay for the lender’s as well as any of your own. Financial due diligence, run by an accounting firm to test your historical numbers, quality of earnings and forecast, is the one that most often moves the deal — because the earnings adjustments that surface there change the leverage multiple and therefore how much you can borrow. Larger or specialised deals add legal, and sometimes commercial, diligence on the market and your position. On a lower-mid-market raise diligence can run from a few tens of thousands to well over £100,000 on a deal that needs the full suite. A clean, well-prepared borrower with current numbers keeps this bill down; a messy data room invites the lender to dig, and you pay for the digging.
Smaller line items round out the third-party bill: a valuation where the lender takes a charge over property, search and registration costs, and any specialist reports a sector needs. None is large on its own; together they are worth a line in the estimate so nothing arrives as a surprise at close. Get a written cost estimate from every party before you start, and hold each to it.
A retainer against the work, a success fee against the result.
A debt adviser is almost always paid a retainer plus a success fee. The retainer is a modest fixed sum that covers building the model, preparing the lender materials and running the process; it keeps both sides committed and is frequently credited in full against the success fee at close. The success fee is the larger part, paid only when the financing completes, set as a percentage of the facilities raised. The percentage falls as the deal size rises, so a smaller raise carries a higher rate and often a minimum fee that makes the work viable. On lower-mid-market deals success fees sit in the low single digits as a percentage of the facility — Solon quotes a standard success fee of 1.25%, set per mandate within a 1.0 to 1.5% range, with a complexity premium on event-driven deals and the retainer creditable against it. The full basis, and how we stay independent when we take nothing undisclosed from a lender, is set out in how we work.
The fee is meant to pay for itself out of the deal rather than sit on top of it. A properly run competitive process moves margin, fees, leverage and the covenant package, and the margin improvement alone typically recovers the fee several times over across the life of the facility, before you count the value of better structure and looser covenants. The test to run before you engage anyone is arithmetic: estimate what sharper pricing and better terms are worth over the life of the facility, then weigh it against the fee. If the saving is several multiples of the cost, retain someone; if it is line-ball, do not. On most raises above a few million pounds it is not line-ball. The one fee to refuse outright is an undisclosed cut taken from the lender as well as from you, which is a conflict dressed up as a discount.
What does a £5m or £10m facility cost in 2026?
These are illustrative, not quotes: two mid-case borrowers on sensible terms, to show how the lines total and how the mix shifts between a bank deal and a fund deal. Real numbers turn on your credit, your sector and the process. The point is the shape of the bill, and the gap between the upfront cost you pay once and the interest you carry for years.
Example A — £5m bank senior term loan, clean credit
A profitable, lowly-geared business refinancing with a clearing or specialist bank. One-off costs at close: an arrangement fee of about 1% is £50,000; combined legal costs on a straightforward bilateral deal, both sides, roughly £30,000 to £45,000; financial diligence, scaled to a clean set of numbers, £25,000 to £45,000; an adviser success fee at, say, 1.25% is £62,500, with the retainer credited against it. That is an upfront bill of roughly £170,000 to £200,000, or about 3.4 to 4.0% of the facility, most of it paid once. The ongoing cost is the interest: at a margin of, say, 3% over a base rate of 3.75%, an all-in rate near 6.75%, or about £337,000 a year on the drawn £5m, which dwarfs the fees over a three-to-five year hold and is the figure a sharper margin actually moves.
Example B — £10m unitranche, growth or acquisition
A business borrowing beyond what a bank will lend (more leverage, a bullet repayment, or a deal timetable a bank cannot meet) takes a fund facility, and pays for the stretch. One-off costs at close: an arrangement fee of 2.5% is £250,000; an OID of 1% withholds a further £100,000; legal costs on a more structured deal, both sides, roughly £60,000 to £90,000; a fuller diligence suite — financial, legal and perhaps commercial — £75,000 to £120,000; an adviser success fee at 1.25% is £125,000. That is an upfront bill of roughly £610,000 to £685,000, about 6.1 to 6.9% of the facility, visibly more than the bank deal, because the fund is doing harder underwriting and the deal is more complex. The ongoing cost is dearer too: at SONIA plus 6.5%, an all-in rate near 10.25%, about £1.03m a year on the drawn £10m, and call protection means leaving early carries its own premium. What the borrower buys for the difference is quantum, structure and speed the bank could not offer — right when a bank cannot fund the plan, and wasted money when it can. The comparison that settles it is the whole all-in cost of the structure that funds your plan set against the whole all-in cost of the one that does not, rather than the fund’s margin against the bank’s.
Two things carry across both examples. First, the upfront bill is a meaningful percentage of the facility once everything is counted, and it is easy to underestimate because it arrives as a dozen separate invoices rather than one. Second, over any realistic hold the interest is far the largest cost, which is why the terms that shave the margin and widen the covenant headroom — the terms a competitive process moves — matter more than the fee that pays for the process. For the bank-versus-fund cost comparison in short form, the guides cover what it costs across lender types.
What moves each cost, and where the leak is.
Each component moves for a reason, and the borrowers who overpay are usually the ones who negotiated the visible number and gave away the buried ones. The margin moves on credit quality and, more than anything, on competition — a lender that knows it is the only bidder has no reason to sharpen its pencil. The fees move on lender type and are far more negotiable than borrowers assume: the arrangement fee, the OID and the call protection are all points a competitive process pushes on, and a borrower going direct to one lender never tests them.
Four leaks recur. The first is anchoring on the margin and ignoring the fee stack — signing a keen headline rate that carries a 3% fee, a 1% OID and heavy call protection, which over a three-year hold costs more than a higher margin with none. The fix is to ask every lender for a single all-in cost to your expected exit, on the same assumptions, and compare those, not the margins. The second is the undrawn commitment — sizing a revolver or a facility larger than you will use and paying a commitment fee, roughly a third of the margin, on money that sits idle. The third is call protection you did not need: taking a fund facility with a non-call period and a stepped prepayment premium when you expect to refinance or sell inside it, then paying to leave. The fourth, and the largest for most, is a single quote — treating the incumbent’s first offer as the market. From the lender’s side of the table, incumbent renewal terms move materially once a borrower puts two or three credible alternatives on the table; a borrower who never does leaves that entire gap on the floor.
The through-line is that the all-in cost, not the headline rate, is the only figure worth comparing, and that competitive tension is the single largest lever a borrower has over almost every line in the stack. It is also the one a borrower cannot manufacture alone. If a raise or a refinancing is on your horizon and you want the cost taken apart against your own numbers, a first conversation is confidential and without obligation — and it is where we tell you plainly whether a process is worth running at all.